George Soros agrees in his thesis with Pedro Sánchez, perpetual bonds are the “salvation” of the EU
George Soros, Hungarian-born American investor is very interested in the European Union issuing perpetual bonds. As he has assured, it is the best formula to fight against the coronavirus pandemic and he has even said that “they could be the salvation of the EU”. Interestingly in this regard, Soros agrees with Pedro Sánchez, who made this proposal to the European Commission chaired by Ursula Von der Leyen. However, the Commission leader rejected it.
“Unfortunately, my suggestion of perpetual bonds has been confused with ‘coronabonds’, and this has made the debate rarer,” speculator Soros said in a questionnaire shared with the press. In this article he explains that “both things are totally different from each other.” According to Soros, “the ‘coronabonds’ have been decisively rejected, and with good reason, since they require a degree of mutualisation that is simply unacceptable.”
George Soros, who with his speculative attack managed in 1992 to remove the pound sterling from the European exchange system on the so-called ‘Black Wednesday’, has also said that through the ‘consols’ the only mutual obligation is the payment of annual interest, « which is insignificant »and would urgently raise a trillion euros with the payment of 5,000 million euros per year in interest.
Purchased by Insurers
“This represents a very low cost / benefit ratio!” Says Soros, for whom this degree of mutualization should be “easily accepted” by the Member States, either unanimously or by a majority coalition of countries in favor.
Thus, he stresses that perpetual bonds would not have to be sold at once; They could be issued in tranches, and would be bought by long-term investors, such as insurers looking for long-term bonds to balance their liabilities, while as markets became more familiar with these new instruments, they would attract more buyers and their prices. they would get an extra benefit.
“This is an excellent time to issue long-term bonds,” emphasizes the financier, recalling that Germany recently managed to sell a 30-year bond at a negative interest rate.
The money raised could be distributed to those who need it most, Soros said.
Likewise, the magnate emphasizes in favor of the ‘consols’ that the money collected would not have to be distributed according to the fiscal code, that is, the ‘shareholding’ of the member states in the ECB, but can be allocated to a greater extent to those who need it most, such as the countries of Southern Europe, which have been most affected by the pandemic.
On the other hand, from a legal point of view, for the issuance of these instruments to be feasible, Soros recalls that the EU must maintain its ‘AAA’ rating, which forces the Twenty-seven to have ‘sufficient own resources’, it is that is, taxes whose collection would cover the cost of the bond service.
In just a few weeks
In this case, he recognizes that taxing each member of the EU is a complicated process, because each country has its own rules and, in some countries, such as Belgium, these are very complicated and the process would take several years, although he points out that The solution to this problem is that taxes “only have to be authorized, there is no need to implement them”, which would reduce the authorization process necessary for the EU to issue the consols after a few weeks.
In perpetual bonds, the principal never has to be paid, but only the interest, says the investor Soros
“Perpetual bonds have enormous advantages over bonds with an expiration date. As its name implies, the principal never has to be paid, but only the annual interest. As I mentioned earlier, that amount is so small that it could easily be approved by the Member States. This should be particularly attractive to the Hanseatic League, led by the Netherlands, “he says.
In this sense, Soros highlights the role to be played by Angela Merkel, whom, as German Chancellor, she considers “the only person who can invalidate the ‘liberal’ establishment ‘” and believes that, with her support, the Summit on May 27 He could accept perpetual bonds as a desirable alternative to explore, although he cautions that “time is running out.”
“Exceptional circumstances require exceptional measures. Perpetual bonds are an exceptional measure. Under normal conditions they should not even be considered. But if the EU is unable to take them into account now, it may not survive the difficulties it is currently facing, “Soros warns.